Thailand’s automotive production could plunge to a 14-year low this year, excluding the pandemic years of 2020-22, dipping to 1.65 million units, though monthly production is expected to start improving slowly in the fourth quarter, says Krungsri Securities (KS).
The decline is attributed to elevated levels of household debt and non-performing loans (NPLs), according to the brokerage.
Car production continued to drop in May, falling 16% year-on-year to 126,000 units, driven by a 55% decline in the production of pickups, while the production of passenger cars dipped 14%, said Naruedom Mujjalinkool, fundamental investment analyst of securities at KS.
Domestic vehicle sales plunged 23% from a year earlier to 50,000 units, the weakest sales figure for the month of May since 2009, except in 2020 during the pandemic, he said.
Exports rose 3% to 89,000 units. Electric vehicle (EV) sales improved slightly from April to 5,000 units, but were still down 8% year-on-year, making up 10% of total domestic car sales, the largest contribution and sales figure in four months.
The price war among EV makers in Thailand should increase consumer interest, as roughly 90% of EVs in the local market are imported. Another price war could break out in the fourth quarter during Motor Expo 2024, which is scheduled from Nov 29 to Dec 10, said Mr Naruedom.
Another factor dampening production is banks have adopted more stringent auto loan criteria because of elevated household debt levels in the country, he said.
“Domestic car sales are unlikely to improve this year based on the high rate of NPLs,” said Mr Naruedom. “This prompted us to downgrade our forecast for vehicle output this year by 6% from 1.75 million units to 1.65 million, the second cut in as many months.”
Vehicle output this year is forecast to be 10% lower than last year.
KS downgraded its projection for domestic car sales in 2024 by 7% to 650,000 units, 16% lower than domestic purchases in 2023.
The brokerage cut its projection for car exports by 1% to 1.09 million units, 2% less than the shipments posted last year, he said.
The Industrial Production Index declined the last 10 months as several factories trimmed working hours or laid off employees, denting household income and consumer spending, said Mr Naruedom.
“We predict monthly car production will start to improve slowly in the final quarter, meaning the earnings of listed auto companies could drop year-on-year for two more quarters,” he said. "Downside risks remain for the brokerage’s earnings forecasts for auto companies under its coverage."